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In our Technical Release 1/2023 relating to the Finance Act, 2023, which was issued on June 9, 2023, our view was that an increased rate of 10 percent as prescribed for the Tax Year 2023 cannot be applied with retrospective effect on account of the judgements of the superior courts. What we stated has been reproduced hereunder for the sake of convenience:

Super Tax: Section 4C & First Schedule

Super tax at the rate of 4% for higher income was levied by the Finance Act, 2022.

This tax was leviable if the income exceeds Rs 150 million. Graduated rates were provided, however income exceeding Rs 300 million was subject to a super tax at the rate of 4% of income to be computed in a particular manner laid down in Section 4C. An enhanced rate of 10% was provided for certain specific industries. The law stated:

Provided that for tax year 2022 for persons engaged, whether partly or wholly, in the business of airlines, automobiles, beverages, cement, chemicals, cigarette and tobacco, fertiliser, iron and steel, LNG terminal, oil marketing, oil refining, petroleum and gas exploration and production, pharmaceuticals, sugar and textiles the rate of tax shall be 10% where the income exceeds Rs 300 million: Provided further that in case of banking companies for tax year 2023, the rate of tax shall be 10% where the income exceeds Rs 300 million.

In the Finance Act, 2023 the brackets for levy have been changed and where income exceeds Rs 400 million but does not exceed Rs. 500 million a rate of 8% of the income has been prescribed whereas where income exceeds Rs 500 million the rate of super tax will be 10% of the income.

Furthermore, in the revised table prescribed for the Tax Year 2022, there is no reference of 10% tax rate for specific industries which has been omitted.


The charge of super tax was declared as ultra vires for the Tax year 2022 by the Sindh High Court. It was held that the tax at the rate of 4% can be charged for the tax year 2023. The rate of 10% for specific industries was held to be discriminatory and ultra vires.

However, the Single Bench of the Lahore High Court has treated 4% tax for the Tax Year 2022 as intra vires but 10% tax for specific industries was held to be ultra vires. On account of the appeal filed by the department, for those particular taxpayers who were in appeal, the Supreme Court of Pakistan asked the companies to pay 50% of that super tax levied. The matter is pending before the Supreme Court of Pakistan.


The question before the court is whether super tax can be levied for a tax year that has already closed before the enactment of the Finance Act. This issue gets further complicated in cases where the income year has already ended on December 31, 2022.

The Pakistani law allows a special year ending on December 31 (1) under Section 74 of the Ordinance. Lahore High Court in its decision has discussed the issue of retrospectivity with reference to the special year (January to December); however, it has not fully taken into account considerations of the relevant law and its nature. There is no bar on the legislature to pass legislation with retrospective effect; however, certain guidelines have to be applied.

It is our view that an increase in tax above 4% (6%, 8% and 10%) is to apply from the Tax Year 2024 and not Tax Year 2023. However, the matter would have to be taken to the court.

In a subsequent decision the Lahore High Court in a Writ Petition No 4027 of 2022 for Fauji Fertilizer Company Limited vs. The Federation of Pakistan and others reiterated that there cannot be any retrospective levy. This affirms our view that the increased rate of super tax under Section 4C (10 percent against 4 percent) is not applicable for the Tax Year 2023.

The Islamabad High Court has reaffirmed our view in the WP 2437/2023. The order sheet states as under:

The petitioner company (Attock Petroleum Ltd.) is aggrieved of the retrospective increase of the rates of supertax for tax year 2023 and onwards with retrospective application. The learned counsel contends citing the judgement of this Court titled Fauji Fertilizer Company Limited and another versus The Federation of Pakistan and others in WP No.4027/2022 to submit that retrospective revision of rates

2 Learned counsel’s submissions carry prima facie force in view of the aforesaid judgement.

3 Admit. Notice to the respondents to file their replies within two weeks from the date of today.

4 The vires of the amendment to the Income Tax Ordinance also being in question, issue notice to the learned Attorney General under Order 27-A CPC.

5 Relist on 24.08.2023.

6 The parties are directed to file their statements of costs of litigation before the next date of hearing. CM No.1/2023 Exemption sought for is allowed subject to all just and legal exceptions. CM No.2/2023 Notice.

7 Pending the next date, for the reasons stated in the admission note, supertax in excess of the rate prescribed before the amendment under challenge will not be recovered, and no demand for supertax inconsistent with Fauji Fertiliser will be raised.

(Sardar Ejaz Ishaq Khan) Judge

In view of the aforesaid development, it is our opinion that the increased rate of super tax is not applicable for the Tax Year 2023.

We are not aware of any procedural difficulty in filing the return on the basis of the order sheet in the case of Attock Petroleum Limited, however, in case of any eventuality otherwise the matter be taken up before the respective High Courts by way of a Writ Petition in line with the case referred above. 1. Also other years

Copyright Business Recorder, 2023


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